At what rate must $400 be compounded annually for it to grow to $716.40 in 10 years?
A) 6%
B) 5%
C) 7%
D) 8%

Question

Quizplus · Accepted Answer

The formula for compound interest is A = P(1 + r)^n, where A is the amount of money accumulated after n years, including interest, P is the principal amount, r is the annual interest rate (decimal), and n is the time (years). Rearranging the formula to solve for r gives us r = ((A/P)^(1/n)) - 1. Substituting the given values (A = $716.40, P = $400, n = 10 years) into the formula gives us r = ((716.40/400)^(1/10)) - 1 = 0.06, or 6%.

At What Rate Must $400 Be Compounded Annually for It